Lowther and Zeng ILS manager to target “entire insurance value-chain”

Richard Lowther and Lixin Zeng’s proposed property-focused start-up Integral ILS will target E&S business through a tie-up with wholesale giant AmWINS, and reinsurance and retro by working with TransRe as it looks to access the “entire insurance value-chain”.

The move comes at a time of opportunity with hard market conditions in E&S and retro and hardening momentum building in reinsurance amid capacity constraints and a more cautious approach to underwriting.

According to Lowther’s LinkedIn profile, the executive started working on the ILS asset manager back in October last year, after leaving his position as managing principal for ILS and Hiscox Partner at Hiscox ILS in Bermuda.

Zeng’s profile indicates that he officially joined up with Integral at the start of this month. Zeng was most recently CEO of AlphaCat Managers, the ILS platform for AIG and Validus.

The two worked together at AlphaCat before Lowther left his position of COO and EVP six years ago to join Hiscox.

According to Lowther’s business profile, Integral ILS is an investor-focused independent ILS asset manager based in Bermuda.

“Our vision is to build high-quality ILS portfolios with comprehensive access to the entire insurance value-chain through strategic alliances with leaders in (re)insurance risk origination.

“Integral combines superior risk selection with a relentless commitment to scientific and analytical resources,” it explains.

It is not known what stage of fundraising the start-up is at, but sources confirmed that Integral is partnering with broker AmWINS and reinsurer TransRe.

Neither parties are thought to be equity investors in the start-up, but it is understood that TransRe has provided debt financing.

AmWINS is expected to work with the ILS manager to source E&S business, which is likely to have a property focus, while TransRe will partner with the venture as an ILS play for reinsurance and retro.

Track record

Details of the arrangement are not known but both AmWINS and TranRe have a track record of working with ILS capital.

AmWINS has created facilities on its underwriting platform to bring in alternative capacity to sit alongside its carrier markets, including a partnership with ILS fund management giant Nephila, that ran for a number of years.

On its website, the giant wholesaler says: “We believe that alternative capital will be a permanent part of the industry’s capital structure and will be a key component in delivering comprehensive cat property solutions alongside the specialty carrier partners.”

TransRe has developed a number of in-house and sidecar-style vehicles that utilize third-party capital and is also an investor in fund manager Pillar Capital. Back in 2014 the Alleghany-owned reinsurer increased its ownership position in Pillar to 50 percent.

It has also worked with partners as a conduit to allow them to access business it writes – including as underwriting manager for Berkshire Hathaway’s Gen Re when it made a move into the brokered market in the US.

Lowther did not respond to a request for comment. TransRe and AmWINS declined to comment.

The Insurer comment

It is undeniable that there are opportunities to deploy capacity in the three sectors Integral ILS is targeting, with a hard market in property E&S and retro, and significant momentum building in reinsurance, fueled by poor underwriting results and turbo-charged in the Covid-19 fallout.

Several “traditional” start-ups are already in the works, as extensively reported by this publication, largely targeting E&S and reinsurance opportunities, while others are scaling up with capital raises.

There has so far been limited activity in the ILS fund and retro space. Indeed, several incumbents have been struggling to retain existing backing, after three years of trapped collateral issues that threaten to become a fourth.

There are also signs of a flight to quality, however, with ILS funds that have solid track records still able to attract investor interest.

Having built Hiscox ILS and AlphaCat, Lowther and Zeng are likely to be seen as falling into that category – although the fundraising challenges met by some proposed retro vehicles in the latter part of 2019 suggest nothing should be taken for granted.

By teaming up with AmWINS and TransRe – effectively for distribution to access business – the duo are already exhibiting their ability to work with blue chip industry players which should be seen by investors as a strong attribute and a stamp of approval.